The August bankruptcy at the solar panel manufacturer Solyndra has generated a predictable political kerfluffle, since the company had received $527 million in loan guarantees from the Obama Administration. The political issues raised by the case are fair game. But I’m more interested in a more general issue:
What is the true cost to taxpayers of loan guarantees?
Obviously, we learn the cost of a particular loan guarantee, like the one for the bankrupt Solyndra, ex post—it’s the amount of money the government has to payout to the creditors. But what is the right estimated cost ex ante?
Coincidentally, August was also the month that saw the CBO publish a report on the true cost to taxpayers of Federal Loan Guarantees for the Construction of Nuclear Power Plants.